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Monday, January 05, 2009

Government efficiency

Is government truly inefficient?

If we're going to call something "inefficient", we have to define the parameters of the efficiency equation: input divided by output, and we have to compare the efficiency to the efficiency of something else. There is no such thing as "absolute" efficiency in the logical sense; there are only comparisons of relative efficiency.

We have seen time and again that government — even our modern dictatorship of bourgeoisie — can perform activities in objective reality — building roads, bridges, airports for example — using an amount of money and labor time comparable to that of private industry. This is not to say that government building projects are always efficient, but then again neither is private industry always efficient.

Rather than inefficient, it's more accurate to say that government tends to be inflexible. But government inflexibility is by design: The whole reason to have the government do something is to make uniform standards prevail. The building inspector is — by design — not interested in your house being built as inexpensively and quickly as possible; she's interested in making sure it's built safely, according to objective, uniform standards. Uniform standards prevent innovation to some extent, but they also prevent mistakes and corruption. If an inspector cannot make an individual "judgment call" and her work is periodically audited according to objective standards, then she also cannot be bought off and pretend she's judging something to be safe when it's actually not safe.

There are some situations where inflexibility is a good thing; there are some situations where inflexibility is a bad thing. The key is discerning the difference, and putting those activities in government hands where inflexibility and uniformity is beneficial.

1 comment:

When I was a kid I would occasionally go hiking with my grandmother. During our hikes we had a simple division of labor...I kept my eyes open for interesting rocks while she kept her eyes open for tasty mushrooms.

Let's say that one day, for whatever reason, my grandmother and I couldn't go hiking but my grandfather could. So I would tell him to keep his eyes open for any interesting rocks...while my grandmother wouldn't even have to remind him to keep his eyes open for tasty mushrooms.

My grandfather certainly cared about both our interests but his definition of an interesting rock was a lot narrower than my own. Plus, it would be likely that his bias towards mushrooms would result in him spending less time looking for rocks.

The combined efforts of my grandmother and myself would lead to an incredibly more efficient allocation in comparison to my grandfather's efforts to select rocks/mushrooms for us.

We can see that the problem with the current political system is that congress has no idea how much public education I would be willing to forgo for improved medicare. Having attended a public university I certainly value public education but I also valued my grandmother's health. Even though my grandmother and grandfather valued both public goods as well, it's very unlikely that our allocations would be the same.

In the private sector every single consumer is forced to consider the opportunity costs of their spending decisions...and every single donor is forced to consider the opportunity costs of their donations. But in the public sector taxpayers are not forced to consider the opportunity costs of their taxes.

Therefore, we can objectively say that with the current system, the public sector is very inefficient.

To greatly improve the efficiency of the public sector we would simple allow taxpayers to directly allocate their individual taxes among the various government organizations at anytime throughout the year. In other words, donations to government organizations should be 100% tax deductible.

In a few of your blog entries I've noticed that you consider yourself to be pragmatic. That's really interesting because I labeled the above concept "pragmatarianism".

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